Correlation Between MCCORMICK and Dennys Corp

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Can any of the company-specific risk be diversified away by investing in both MCCORMICK and Dennys Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MCCORMICK and Dennys Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCCORMICK INC 325 and Dennys Corp, you can compare the effects of market volatilities on MCCORMICK and Dennys Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MCCORMICK with a short position of Dennys Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCCORMICK and Dennys Corp.

Diversification Opportunities for MCCORMICK and Dennys Corp

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between MCCORMICK and Dennys is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MCCORMICK INC 325 and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp and MCCORMICK is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MCCORMICK INC 325 are associated (or correlated) with Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of MCCORMICK i.e., MCCORMICK and Dennys Corp go up and down completely randomly.

Pair Corralation between MCCORMICK and Dennys Corp

Assuming the 90 days trading horizon MCCORMICK INC 325 is expected to generate 0.14 times more return on investment than Dennys Corp. However, MCCORMICK INC 325 is 7.34 times less risky than Dennys Corp. It trades about 0.0 of its potential returns per unit of risk. Dennys Corp is currently generating about -0.05 per unit of risk. If you would invest  9,495  in MCCORMICK INC 325 on September 12, 2024 and sell it today you would lose (26.00) from holding MCCORMICK INC 325 or give up 0.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy76.99%
ValuesDaily Returns

MCCORMICK INC 325  vs.  Dennys Corp

 Performance 
       Timeline  
MCCORMICK INC 325 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MCCORMICK INC 325 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MCCORMICK is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Dennys Corp 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Dennys Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dennys Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

MCCORMICK and Dennys Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MCCORMICK and Dennys Corp

The main advantage of trading using opposite MCCORMICK and Dennys Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCCORMICK position performs unexpectedly, Dennys Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dennys Corp will offset losses from the drop in Dennys Corp's long position.
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The idea behind MCCORMICK INC 325 and Dennys Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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